Finance Act 1993

[F1 Corporation tax: currency U.K.

Textual Amendments

F1 Ss. 92-92E substituted for ss. 92-94AB (with effect in accordance with s. 52(3) of the amending Act) by Finance Act 2004 (c. 12), Sch. 10 para. 77

92 The basic rule: sterling to be used U.K.

(1) For the purposes of corporation tax the profits of a company for an accounting period must be computed and expressed in sterling.

(2) The following sections contain further provision as to the application of subsection (1) to certain profits or losses falling to be computed in accordance with generally accepted accounting practice—

• section 92A (company operating in sterling and preparing accounts in another currency);

• section 92B (company operating in currency other than sterling and preparing accounts in another currency);

• section 92C (company preparing accounts in currency other than sterling).

• [F2 section 92D (sterling equivalents: the basic rule);

• sections 92DA and 92DB (sterling equivalents: special rules where amounts carried back or forward);

• sections 92DC and 92DD (adjustment of sterling amounts carried back or forward where operating currency changes).]

Textual Amendments

F2 Words in s. 92(2) inserted (with effect in accordance with Sch. 18 para. 7 of the amending Act) by Finance Act 2009 (c. 10), Sch. 18 para. 2 (with Sch. 18 paras. 8-13)

92A Company operating in sterling and preparing accounts in another currency U.K.

(1) This section applies if, for a period of account, in accordance with generally accepted accounting practice, a company resident in the United Kingdom—

(a) prepares its accounts in a currency other than sterling, and

(b) in those accounts identifies sterling as its functional currency.

(2) Profits or losses of the company for the period that fall to be computed in accordance with generally accepted accounting practice for corporation tax purposes must be computed in sterling as if the company prepared its accounts in sterling.

92B Company operating in currency other than sterling and preparing accounts in another currency U.K.

(1) This section applies if, for a period of account, in accordance with generally accepted accounting practice—

(a) a company resident in the United Kingdom prepares its accounts in one currency,

(b) in those accounts it identifies another currency as its functional currency, and

(c) that currency is not sterling.

(2) Profits or losses of the company for the period that fall to be computed in accordance with generally accepted accounting practice for corporation tax purposes must be computed in sterling by—

(a) computing those profits or losses in the functional currency as if the company prepared its accounts in that currency, and

(b) taking the sterling equivalent of those profits or losses.

(3) Where this section applies, it shall be assumed that any sterling amount mentioned in the Corporation Tax Acts is its equivalent expressed in the functional currency of the company.

[F3 (4) Where, for the purposes of computing the profits or losses of the company arising in an accounting period, an amount expressed in sterling is required by subsection (3) to be translated into its equivalent expressed in another currency, it must be translated by reference to the appropriate exchange rate.]

Textual Amendments

F3 S. 92B(4) inserted (with effect in accordance with Sch. 18 para. 7 of the amending Act) by Finance Act 2009 (c. 10), Sch. 18 para. 3 (with Sch. 18 paras. 8-13)

92C Company preparing accounts in currency other than sterling U.K.

(1) This section applies in relation to a company resident in the United Kingdom if, for a period of account—

(a) the company prepares its accounts in a currency other than sterling (the “accounts currency”), and

(b) neither section 92A nor section 92B applies.

(2) This section also applies in relation to a company that is not resident in the United Kingdom if, for a period of account, the company prepares its return of accounts in a currency other than sterling (the “accounts currency”).

(3) Profits or losses of the company for the period that fall to be computed in accordance with generally accepted accounting practice for corporation tax purposes must be computed in sterling by—

(a) computing those profits or losses in the accounts currency, and

(b) taking the sterling equivalent of those profits or losses.

(4) Where this section applies, it shall be assumed that any sterling amount mentioned in the Corporation Tax Acts is its equivalent expressed in the accounts currency of the company.

[F4 (5) Where, for the purposes of computing the profits or losses of the company arising in an accounting period, an amount expressed in sterling is required by subsection (4) to be translated into its equivalent expressed in another currency, it must be translated by reference to the appropriate exchange rate.]

Textual Amendments

F4 S. 92C(5) inserted (with effect in accordance with Sch. 18 para. 7 of the amending Act) by Finance Act 2009 (c. 10), Sch. 18 para. 4 (with Sch. 18 paras. 8-13)

[F5 92D Sterling equivalents: the basic rule U.K.

(1) This section applies where, for the purposes of computing the profits or losses of a company arising in an accounting period, a profit or loss is required by section 92B or 92C to be translated into its sterling equivalent.

(2) The translation must be made by reference to the appropriate exchange rate.

(3) This section is subject to sections 92DA and 92DB (special rules where translation is for the purpose of computing amounts to be carried back or carried forward to other accounting periods).

Textual Amendments

F5 Ss. 92D-92DE substituted for s. 92D (with effect in accordance with Sch. 18 para. 7 of the amending Act) by Finance Act 2009 (c. 10), Sch. 18 para. 5 (with Sch. 18 paras. 8-13)

92DA Sterling equivalents: carried-back amounts U.K.

(1) This section applies where, for the purpose of computing a carried-back amount in respect of a company, a loss (“the loss”) is required by section 92B or 92C to be translated into its sterling equivalent.

(2) The translation must be made in accordance with rule 1, 2 or 3 (whichever is applicable).

(3) Rule 1 applies if the operating currency of the company in the accounting period in which the loss arises (“the later operating currency”) is the same as the operating currency of the company in the accounting period to which the carried-back amount is to be carried back (“the earlier operating currency”).

(4) Rule 1 is that the loss must be translated into its sterling equivalent by reference to the same rate of exchange as that at which the profit against which the carried-back amount is to be set off is required to be translated under section 92D.

(5) Rule 2 applies if—

(a) the later operating currency is not the same as the earlier operating currency, and

(b) the earlier operating currency is sterling.

(6) Rule 2 is that the loss must be translated into its sterling equivalent by reference to the spot rate of exchange for the last day of the relevant accounting period.

(7) Rule 3 applies if—

(a) the later operating currency is not the same as the earlier operating currency, and

(b) the earlier operating currency is a currency other than sterling.

(8) Rule 3 is that the loss must be translated into its sterling equivalent by—

(a) being translated into the earlier operating currency by reference to the spot rate of exchange for the last day of the relevant accounting period, before

(b) being translated into sterling by reference to the same rate of exchange as that at which the profit against which the carried-back amount is to be set off is required to be translated under section 92D.

(9) In this section “the relevant accounting period” means the latest accounting period of the company before the accounting period in which the loss arises in which the operating currency of the company is the earlier operating currency.

Textual Amendments

F5 Ss. 92D-92DE substituted for s. 92D (with effect in accordance with Sch. 18 para. 7 of the amending Act) by Finance Act 2009 (c. 10), Sch. 18 para. 5 (with Sch. 18 paras. 8-13)

92DB Sterling equivalents: carried-forward amounts U.K.

(1) This section applies where, for the purpose of computing a carried-forward amount in respect of a company, a loss (“the loss”) is required by section 92B or 92C to be translated into its sterling equivalent.

(2) The translation must be made in accordance with rule 1, 2 or 3 (whichever is applicable).

(3) Rule 1 applies if the operating currency of the company in the accounting period in which the loss arises (“the earlier operating currency”) is the same as the operating currency of the company in the accounting period to which the carried-forward amount is to be carried forward (“the later operating currency”).

(4) Rule 1 is that the loss must be translated into its sterling equivalent by reference to the same rate of exchange as that at which the profit against which the carried-forward amount is to be set off is required to be translated under section 92D.

(5) Rule 2 applies if—

(a) the earlier operating currency is not the same as the later operating currency, and

(b) the later operating currency is sterling.

(6) Rule 2 is that the loss must be translated into its sterling equivalent by reference to the spot rate of exchange for the first day of the relevant accounting period.

(7) Rule 3 applies if—

(a) the earlier operating currency is not the same as the later operating currency, and

(b) the later operating currency is a currency other than sterling.

(8) Rule 3 is that the loss must be translated into its sterling equivalent by—

(a) being translated into the later operating currency by reference to the spot rate of exchange for the first day of the relevant accounting period, before

(b) being translated into sterling by reference to the same rate of exchange as that at which the profit against which the carried-forward amount is to be set off is required to be translated under section 92D.

(9) In this section “the relevant accounting period” means the earliest accounting period of the company after the accounting period in which the loss arises in which the operating currency of the company is the later operating currency.

Textual Amendments

F5 Ss. 92D-92DE substituted for s. 92D (with effect in accordance with Sch. 18 para. 7 of the amending Act) by Finance Act 2009 (c. 10), Sch. 18 para. 5 (with Sch. 18 paras. 8-13)

92DC Adjustment of sterling losses: carried-back amounts U.K.

(1) This section applies if conditions A to C are met.

(2) Condition A is that, in accordance with generally accepted accounting practice, a company resident in the United Kingdom—

(a) prepares its accounts for a period of account in sterling, or

(b) prepares its accounts for a period of account in a currency other than sterling and in those accounts identifies sterling as its functional currency.

(3) Condition B is that a loss of the company for the period that falls to be computed in accordance with generally accepted accounting practice for corporation tax purposes (“the loss”) is to be a carried-back amount.

(4) Condition C is that the operating currency of the company in the accounting period to which the loss is to be carried back (“the earlier operating currency”) is a currency other than sterling.

(5) The loss must be adjusted by—

(a) being translated into the earlier operating currency by reference to the spot rate of exchange for the last day of the relevant accounting period, before

(b) being translated into sterling by reference to the same rate of exchange as that at which the profit against which the carried-back amount is to be set off is required to be translated under section 92D.

(6) In this section “the relevant accounting period” means the latest accounting period of the company before the accounting period in which the loss arises in which the operating currency of the company is the earlier operating currency.

Textual Amendments

F5 Ss. 92D-92DE substituted for s. 92D (with effect in accordance with Sch. 18 para. 7 of the amending Act) by Finance Act 2009 (c. 10), Sch. 18 para. 5 (with Sch. 18 paras. 8-13)

92DD Adjustment of sterling losses: carried-forward amounts U.K.

(1) This section applies if conditions A to C are met.

(2) Condition A is that, in accordance with generally accepted accounting practice, a company resident in the United Kingdom—

(a) prepares its accounts for a period of account in sterling, or

(b) prepares its accounts for a period of account in a currency other than sterling and in those accounts identifies sterling as its functional currency.

(3) Condition B is that a loss of the company for the period that falls to be computed in accordance with generally accepted accounting practice for corporation tax purposes (“the loss”) is to be a carried-forward amount.

(4) Condition C is that the operating currency of the company in the accounting period to which the loss is to be carried forward (“the later operating currency”) is a currency other than sterling.

(5) The loss must be adjusted by—

(a) being translated into the later operating currency by reference to the spot rate of exchange for the first day of the relevant accounting period, before

(b) being translated into sterling by reference to the same rate of exchange as that at which the profit against which the carried-forward amount is to be set off is required to be translated under section 92D.

(6) In this section “the relevant accounting period” means the earliest accounting period of the company after the accounting period in which the loss arises in which the operating currency of the company is the later operating currency.

Textual Amendments

F5 Ss. 92D-92DE substituted for s. 92D (with effect in accordance with Sch. 18 para. 7 of the amending Act) by Finance Act 2009 (c. 10), Sch. 18 para. 5 (with Sch. 18 paras. 8-13)

92DE Meaning of “carried-back amount” and “carried-forward amount” U.K.

(1) In sections 92DA and 92DC “carried-back amount” means—

(a) an amount carried back under section 393A(1)(b) of the Taxes Act 1988 (trading losses),

(b) an amount carried back by virtue of a claim under section 459(1)(b) of the Corporation Tax Act 2009 (non-trading deficits from loan relationships), or

(c) an amount carried back under section 389(2) of the Corporation Tax Act 2009 (deficits of insurance companies).

(2) In sections 92DB and 92DD “carried-forward amount” means—

(a) an amount carried forward under section 76(12) or (13) of the Taxes Act 1988 (certain expenses of insurance companies),

(b) an amount carried forward under section 392A(2) or (3) of the Taxes Act 1988 (UK property business losses),

(c) an amount carried forward under section 392B(1)(b) of the Taxes Act 1988 (overseas property business losses),

(d) an amount carried forward under section 393(1) of the Taxes Act 1988 (trading losses),

(e) an amount carried forward under section 396(1) of the Taxes Act 1988 (losses from miscellaneous transactions),

(f) an amount carried forward under section 436A(4) of the Taxes Act 1988 (insurance companies: losses from gross roll-up business),

(g) an amount carried forward under section 391(2) of the Corporation Tax Act 2009 (deficits of insurance companies),

(h) an amount carried forward under section 457(3) of the Corporation Tax Act 2009 (non-trading deficits from loan relationships),

(i) an amount carried forward under section 753(3) of the Corporation Tax Act 2009 (non-trading loss on intangible fixed assets),

(j) an amount carried forward under section 925(3) of the Corporation Tax Act 2009 (patent income: relief for expenses), or

(k) an amount carried forward under section 1223 of the Corporation Tax Act 2009 (expenses of management and other amounts).

(3) References in sections 92DB and 92DD to the profit against which a carried-forward amount is to be set off are, in the case of a carried-forward amount to which this subsection applies, to the profit in computing which the amount is deductible, disregarding the deduction.

(4) Subsection (3) applies to a carried-forward amount that is treated as arising in an accounting period later than that in which it in fact arises, and is accordingly deductible in computing a profit for the later period.]

Textual Amendments

F5 Ss. 92D-92DE substituted for s. 92D (with effect in accordance with Sch. 18 para. 7 of the amending Act) by Finance Act 2009 (c. 10), Sch. 18 para. 5 (with Sch. 18 paras. 8-13)

92E [F6 Interpretation of sections 92A to 92DD] U.K.

[F7 (A1) This section applies for the purposes of sections 92A to 92DD.]

(1) References F8 ... to the “accounts”of a company resident in the United Kingdom are to—

(a) the annual accounts of the company required by [F9 Part 15 of the Companies Act 2006]; or

(b) if the company is not required to prepare such accounts, the accounts which it is required to keep under the law of the country or territory under whose laws the company is incorporated; or

(c) if the company is not so required to keep accounts, such of its accounts as most closely correspond to accounts which it would have been required to prepare if the provisions of [F10 Part 15 of the Companies Act 2006] applied to it.

(2) [F11 A reference] to the “return of accounts”of a company not resident in the United Kingdom is to a return of such accounts of its permanent establishment in the United Kingdom as may be required by the Inland Revenue under paragraph 3 of Schedule 18 to the Finance Act 1998 (company tax returns).

(3) References F12 ... to a company’s “functional currency”are to the currency of the primary economic environment in which the company operates.

[F13 (4) References to “the appropriate exchange rate”, in relation to the translation of an amount for the purposes of computing the profits or losses of a company arising in an accounting period, are to—

(a) the average exchange rate for the accounting period, or

(b) where the amount to be translated relates to a single transaction, an appropriate spot rate of exchange for the transaction, or

(c) where the amount to be translated relates to more than one transaction, a rate of exchange derived on a just and reasonable basis from appropriate spot rates of exchange for those transactions.

(5) References to the “operating currency” of a company in an accounting period are to the currency in which profits or losses of that company arising in that accounting period that fall to be computed in accordance with generally accepted accounting practice for corporation tax purposes are required to be computed by virtue of section 92(1), 92A(2), 92B(2)(a) or 92C(3)(a).]]

Textual Amendments

F6 S. 92E heading substituted (with effect in accordance with Sch. 18 para. 7 of the amending Act) by Finance Act 2009 (c. 10), Sch. 18 para. 6(7) (with Sch. 18 paras. 8-13)

F7 S. 92E(A1) inserted (with effect in accordance with Sch. 18 para. 7 of the amending Act) by Finance Act 2009 (c. 10), Sch. 18 para. 6(2) (with Sch. 18 paras. 8-13)

F8 Words in s. 92E(1) omitted (with effect in accordance with Sch. 18 para. 7 of the amending Act) by virtue of Finance Act 2009 (c. 10), Sch. 18 para. 6(3) (with Sch. 18 paras. 8-13)

F9 Words in s. 92E(1)(a) substituted (6.4.2008) by The Companies Act 2006 (Consequential Amendments) (Taxes and National Insurance) Order 2008 (S.I. 2008/954), arts. 1(1), 19(a) (with art. 4)

F10 Words in s. 92E(1)(c) substituted (6.4.2008) by The Companies Act 2006 (Consequential Amendments) (Taxes and National Insurance) Order 2008 (S.I. 2008/954), arts. 1(1), 19(b) (with art. 4)

F11 Words in s. 92E(2) substituted (with effect in accordance with Sch. 18 para. 7 of the amending Act) by Finance Act 2009 (c. 10), Sch. 18 para. 6(4) (with Sch. 18 paras. 8-13)

F12 Words in s. 92E(3) omitted (with effect in accordance with Sch. 18 para. 7 of the amending Act) by virtue of Finance Act 2009 (c. 10), Sch. 18 para. 6(5) (with Sch. 18 paras. 8-13)

F13 S. 92E(4)(5) inserted (with effect in accordance with Sch. 18 para. 7 of the amending Act) by Finance Act 2009 (c. 10), Sch. 18 para. 6(6) (with Sch. 18 paras. 8-13)

F14 95 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . U.K.

Textual Amendments

F14 Ss. 92-94 substituted (28.7.2000 with effect as mentioned in 105(2)-(5) of the amending Act) for ss. 92-95 by 2000 c. 17, s. 105(1)

[F15 96 Foreign companies: trading currency. U.K.

(1) In Schedule 24 to the Taxes Act 1988 (assumptions for calculating chargeable profits, creditable tax and corresponding United Kingdom tax of foreign companies) the following paragraph shall be inserted after paragraph 4—

“4A (1) Sub-paragraph (2) below applies where—

(a) the company carries on a trade, and

(b) the currency used in the accounts of the company for an accounting period is a currency other than sterling.

(2) It shall be assumed that by virtue of regulations under section 93 of the Finance Act 1993 (corporation tax: currency to be used) the basic profits or losses of the trade for the accounting period are to be computed and expressed for the purposes of corporation tax in the currency used in the accounts of the company for the period.

(3) References in this paragraph to the accounts of a company—

(a) are to the accounts which the company is required by the law of its home State to keep, or

(b) if the company is not required by the law of its home State to keep accounts, are to the accounts of the company which most closely correspond to the individual accounts which companies formed and registered under the M1 Companies Act 1985 are required by that Act to keep;

and for the purposes of this paragraph the home State of a company is the country or territory under whose law the company is incorporated.

(4) The reference in sub-paragraph (2) above to the basic profits or losses of the trade for the accounting period shall be construed in accordance with section 93 of the Finance Act 1993.”

(2) This section applies in relation to any accounting period beginning on or after the day appointed under section 165(7)(b) below.]

Textual Amendments

F15 S. 96 repealed (retrospectively) by 1995 c. 4, s. 162, Sch. 29 Pt. VIII(18), Note

Marginal Citations

M1 1985 c. 6.